Federal highway reauthorization, federal funds and uncertainty loom for Vermont transportation budget

A federal overview to the House Transportation Committee on Jan. 24 described how federal reauthorization and recent federal decisions could materially affect Vermont’s transportation budget, which currently relies on federal sources for about 55% of transportation spending.

Costa Patez, who identified himself as the federal policy director at the Agency of Transportation, told the committee, “Trans federal transportation funds generally account for over half our state transportation budget. Right now it's 55%.” He said federal grants and formula apportionments vary by mode and program and the federal process is starting now for a multiyear reauthorization.

Patez walked members through the federal reauthorization cycle and the role of the Highway Trust Fund, which primarily uses motor-fuel taxes and, in recent years, also general fund transfers. He described the Infrastructure Investment and Jobs Act (IIJA) as a unique five-year bill that added supplemental, often competitive, grant programs beyond the core formula apportionments.

Committee members asked about a recent executive order and whether programs created or funded under IIJA—examples cited included the National Electric Vehicle Infrastructure program and certain competitive charging and fueling grants—could be suspended or altered. Representative Burke asked whether carbon reduction or protect/resilience program funds could be “clawed back.” Patez said the executive order issued earlier in the week was broadly worded and the Office of Management and Budget will provide implementation direction; “we don't know is the short answer at this point until we get something in writing from the federal government,” he said.

Patez also explained that federal aid programs come with eligibility and timing rules. He said highway formula funds are relatively predictable, while many aviation and rail projects depend on competitive grants. “We get three plus one years generally, for highways to...obligate money for a project,” he said, noting multi-year obligation and drawdown timelines for federal funds.

Members and staff highlighted dual risks: (1) uncertainty in long-term federal policy and funding levels as Congress reauthorizes programs, and (2) near-term ambiguity about whether recently created or supplemented federal grant programs will continue or be curtailed. Patez said Congress will begin reauthorization work this year and that federal priorities and administration policy will shape the outcome.

Committee members asked the Agency’s federal team to continue tracking developments and to return with written guidance once federal agencies or OMB issue implementing guidance. Patez said the Agency and the state’s Federal Highway Division are coordinating with the congressional delegation to learn practical effects and next steps.